Posted by Canadian Dream on April 22, 2010
Yesterday I had a refreshing reminder on why I carry car insurance. I was pulling into a parking spot and was about half way in when the car that was partly in front of my vehicle started to pack up. I slammed on the horn and luckily the driver stopped. My car had no damage, but it was a close call since I had less than six inches of room to spare.
I consider myself a fairly good driver given my age. By virtue of several of my jobs over the years I’ve logged more time behind the wheel of a vehicle than I care to admit. Yet at the same time I’m aware I’m not perfect I can screw up. So if I can screw up then the average driver is much more likely to screw up, hence I better have some insurance to protect myself from other people’s stupidity. The same goes for life insurance and house insurance. I’m not so worried about my wife or me setting fire to the house, but I am concerned enough about my two curious boys to not leave out matches near them.
I think insurance is highly underestimated how critical it is to your overall financial well being until you are making a claim. At that point you are likely damn happy to have it and glad you have been paying premiums for years. Now some people would question isn’t that a waste of money to pay premiums? No, in my mind I’m not wasting the money. I’m paying someone else to take on the risk in my place. I’m getting a service for my money and I’m happy to send them a cheque for it. If they can make a profit on it, so be it.
On the other hand I firmly believe insurance should be used reasonably. Insurance in my mind is for those high cost items that could wipe me out financially speaking, not for every little thing I buy at the electronics store. It is very possible to have too much insurance and then be wasting money. One way to reduce your insurance costs is to keep your deductibles on the large side and self-insure for those minor items in life.
For whatever reason life insurance tends to be a common one people go over kill on. In my family’s case both my wife and I carry $500,000 policies at the moment. That number was chosen for both of use to have enough money to finish raising the kids and pay off the mortgage. It’s also income replacement for me and childcare replacement for my wife. Now that I’m on a campaign to kill off the mortgage that value will likely come down by $100,000 in the next two years. Then as my saving increase and we are less dependent on my future income we will continue to drop the insurance value down. There really isn’t a reason to have life insurance once you are financially independent since your income comes from your savings and not you.
So when planning for other people’s stupidity make sure you don’t start going stupid yourself. Use insurance wisely to cover those huge “Oh my GOD!” events and suck up the “Oh, shit” minor events. And of course, be prepared to use your horn to stop stupid people from hitting your car.
Posted by Canadian Dream on April 21, 2010
I’ve typically not read much on macroeconomics so it was a bit interesting to receive a review copy of Supercycles by Arun Motianey. Basically Arun discusses what has happened in history from economic point of view while reviewing previous developments in economic theory and then proposes a different take on it, called the Supercycle. From there he then lays out three possible outcomes for today’s economy: deflation, inflation or stagflation and some suggestions on how to invest in each case (he wisely doesn’t try to predict which will occur since it depends on what the central bank does).
I won’t get into too much detail on what the Supercycle is and how it works since that is most of the book, but I will give you a quick summary. First imagined there is a pipe from raw goods (commodities) that continues to middle manufacturing all the way to final consumption of a good. You would notice that the pipe crosses from country boarders as it snakes around the world. Well the Supercycle is really just a relative price imbalance that causes a cycle of boom and busts down this pipe. It would sort of look like a large snake eating a pig as it travels down the pipe. From there we get into all sorts of interesting implications on how that works with a gold standard versus floating exchange rates.
Perhaps the most interesting thing I learned from this book is how even those very smart folks at the central banks of the world don’t entirely know what they are doing. Their work is only as good as their model is and just about every model has its blind spots. Hence it is fairly easy for things to go to hell and get a crash that no one saw coming. Arun actual suggests economists need to start thinking a little bit more like engineers and focus on practical applications for their work. Being an engineer I ,of course, have to agree a bit.
Overall it was an interesting read for me, but I will caution that at points it got a bit technical. I’ve never had any formal education on economics and I was able to follow it the text fairly easily.
Now for the fun part of this post. The double give-a-way. First I’m giving away a copy of Supercycles. To enter just leave a comment on this post with a valid email address so I can contact you. One entry per person. Open to residents of Canada. Winner will be determined by random number generator on April 29, 2010 at 8 pm CST.
You can also win on a second contest being hosted by the publisher of Supercycles, McGraw Hill. To enter that contest go here and you need to enter your name and email address (just like a comment) and that draw closes on April 30, 2010. Best of luck in both draws.
Posted by Dave on April 20, 2010
I have the opportunity to apply for a new position at work. If I were to get the job, it would mean a 3% (I know huge right – I work for the government) raise. The position essentially formalizes the job that I currently do, which is why I will probably end up applying for it in the end.
There are a few positive things that going for this position may lead to (other then the tens and tens of dollars I would get as a raise).
Higher potential earnings: My workplace classifies positions into specific job bands. I am currently at the maximum of my current job band, as I have been in the same position since I graduated University 6 years ago. The new position is one job band up, which would allow for salary growth to occur in future years.
Management Experience: I don’t have any management experience – this position is almost ideal for me in this aspect as I would not really have people reporting to me, but I would have a mentoring/training role. I am leery in dealing with personnel issues, such as performance reports and dealing with people’s personal problems, but I enjoy teaching people new things.
More interesting work: As much as I enjoy my current position (hence the reason I have stayed in it for an extended period of time) the added complexity of the work in the new position might make my workday more interesting.
There are a couple of potential negative outcomes if I were to get this job:
Greater Scrutiny of my work: The more complex work I would be doing would come with increased scrutiny by management. Although not a bad thing, it could add more stress to my workday that I currently don’t have to deal with. Additionally, right now I am one of 50 people doing a similar job – the new position would make me one of 6, which I guess would put more of a “spotlight” on me than I currently have. Now, I can essentially fade into the background, which wouldn’t be possible in the new position.
I could continue doing what I am doing and do it well: I have gotten excellent performance reviews in the past few years and am good at my current position. There is a potential of failure, as I would be leaving my comfort zone with some of the duties I would have to carry out. If I were to stay in my current position I wouldn’t have to worry about this issue.
For me, the potential positives outweigh the negatives in this situation. My goal is to be highly employable – hence the reason for the accounting designation and other training I have gotten on the job. The added responsibility will hopefully help me quickly find a comparable position if I were to ever lose my current job (something that could potentially devastate my plans for early retirement). The added benefit of higher potential earnings in future years could also help in paying off my debt and creating a pool of savings.
What do you think? I realize I have been somewhat vague on specifics, but does this seem like a good idea? How do you decide whether to go for a promotion or stay where you’re at?
